LAW

What are the Top Personal Tax Deductions in the USA?

If you itemize your personal deductions on your return rather than accepting the standard deduction, you can only claim the majority of the top individual tax deductions. Only over 11% of filers now itemize due to the almost doubled standard deduction in 2018. The standard deduction for single filers in 2022 is $12,950, while for married couples filing jointly, it is $25,900. Additionally, several itemizers’ personal deductions were scaled back or abolished. You itemize only when your personal itemized deductions are more than your standard deduction. Since tax deduction is a complex subject, one must consult tax law firm Virginia Beach.

Top personal deductions for individuals

1. Mortgage Interest

You can write off the mortgage interest—but not the principal—you pay on a loan backed by your primary dwelling or second home if you itemize your deductions. You must make the repayments, which are notified to the IRS by your lender, to be eligible for the deduction.

Interest on house loan consolidation debt up to $1 million is exempt for first and second homes acquired before December 15, 2017. For homes acquired after December 15, 2017, homeowners can deduct only up to $750,000 in acquisition debt for their first and second properties. This 25% drop in the deduction for mortgage interest is projected to last from 2018 through 2025. However, the decrease does not apply to recapitalizations of properties acquired before December 15, 2017, as long as the fresh loan does not exceed the value of the refinanced debt.

2. Taxes

You can deduct state and local taxes if you itemize, comprising (1) real estate taxes and (2) income tax or sales tax Virginia Beach, whichever one is larger. Previously, there was no cap on this exclusion. However, payers may deduct up to $10,000 in local and state taxes annually from 2018 through 2025. This $10,000 limit is applicable to both married and single filers and is not inflation-indexed.

3. Donations

If you itemize donations, you can exclude any cash or noncash donation you make to a qualifying nonprofit organization. You must have evidence for every cash contribution, even if it is less than $250. You must get a receipt or acknowledgment from the nonprofit organization for any noncash (property) donations and cash commitments exceeding $250. You must report noncash (property) contributions of more than $500 on Form 8283, Noncash Charitable Contributions, along with your tax return.

Taxpayers who do not itemize their deductions may deduct $300 of qualifying charitable donations as an “above the line” deduction in 2020 and 2021 under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (married taxpayers filing jointly may deduct $600 in 2021).

4. Medical Expenses 

If you itemize your deductions, you can deduct any medical and dental expenditures that surpass 7.5% of your AGO. Eligible medical costs include both premium payments for health insurance and out-of-pocket spending for you and your dependents that are not protected by insurance.

If you have a qualifying Health Savings Account (HSA), you may deduct your donations from the account and don’t have to pay taxes on the interest you earn. To open an HSA account, you need to have a high-deductible health plan that complies with the HSA regulations. You may use the funds in your HSA account to pay for practically any medical bill.…

Things to know about Self-Settled Asset Protection Trusts

When it comes to financial planning, one must consider opting for a self-settled asset protection trust. With a self-settled asset protection trust, one can protect their assets from creditors. However, by making an SSAPT, a person can still leverage a certain level of interest and benefit from the trust and its assets. The first step to creating an SSAPT is speaking to a tax law firm Virginia Beach. 

In this blog, we will look into all the essential aspects of Self-Settled Asset Protection Trust

How Self-Settled Asset Protection Trust goes with the estate plan? 

People in professions like accountancy, law, or medical care, are vulnerable to creditors’ claims. If you are someone with high worth and exposed to creditors, lawsuits, or third-party claims, you should consider getting a Self-Settled Asset Protection Trust. 

Although an SSAPT will cover you against creditors’ claims, you will have to meet specific requirements to be able to have one. However, one must keep in mind that an SSAPT doesn’t provide protection from all risks. Moreover, the requirements for having an SSAPT can make it a complicated process. 

Another important thing one must be aware of is that the self-settled asset protection trust should be irrevocable. Besides this, the SSAPT should be created under specific laws and regulations. The creator of the SSAPT is called a grantor or settlor. The settlor of the trust can transfer the assets to the SSAPT, leverage some benefits or interest from the assets in the trust, eliminate creditors’ claim on the assets. 

According to some IRS Lawyer Virginia Beach, people often dismiss the option of creating a self-settled asset protection trust simply because it is irrevocable. But they fail to look at all the good sides of an SSAPT.

A person can create an SSAPT in Virginia under Sections 64.2-745.1 and 745.2 of the Code of Virginia. The legislative provisions are extensive and detailed, but they allow the trustee to preserve assets during difficult circumstances. These ordinances are new, and the criteria have not yet been appropriately tested in Virginia tribunals. Still, they are built on model legislation that has been utilized in other states in different forms.

The best time to put up a self-settled asset protection trust is before the properties are at risk of being attacked. Thus, the Self-settled asset protection trust can only be effective if created before there is any creditor claim. If the SSAPT is created when there are outstanding creditor claims, it can be subject to dispute. Besides this, the settlor will remain solvent even after the transfer of the specific assets to the SSAPT.

If these two conditions are not satisfied, the settlor may be accused of attempting to evade valid claims by transferring assets fraudulently.

Finally, an SSAPT can be formed as a “grantor trust” for taxation purposes, similar to other irrevocable trusts, to avoid paying taxes at the trust level and offer a tax-free advantage to the trust heirs.…

Scroll to top